We have seen big changes in the payments landscape this year. Technologies such as contactless payments have seen five years of growth in just the last six months. Companies that didn’t have a large digital footprint before the pandemic suddenly realized they had to adapt, and fast. This is where today’s guest comes in.
Our guest on the Lend Academy Podcast this week is Brian Dammeir, the President – North America for Adyen. Adyen is the payments leader in Europe where it is publicly traded and has a market cap north of $40 billion. While it started in Europe it is a global payments company and is getting real traction with established American brands. And the pandemic has accelerated this traction.
Welcome to the Lend Academy Podcast, Episode No. 264. This is your host, Peter Renton, Founder of Lend Academy and Co-Founder of LendIt Fintech.
Peter Renton: Today’s episode is sponsored by Lendit Fintech USA, the world’s largest fintech event dedicated to lending and digital banking is going virtual. It’s happening online September 29th through October 1st. This year, with everything that’s been going on, there’ll be so much to talk about. It will likely be our most important show ever. So, join the fintech community online this year where you will meet the people who matter, learn from the experts and get business done. LendIt Fintech, lending and banking connected. Sign up today at lendit.com/usa
Today on the show, I am delighted to welcome Brian Dammeir, he is the President of North America for Adyen. Now, Adyen are a European-based company, they’re very big in Europe, they’re a public company and they’re starting to get some traction here in the US. I also wanted to get Brian on the show just to introduce us to Adyen, talk a little bit about what they do and what makes them unique.
Obviously, we talk about the challenges of the pandemic, what he sees as sort of the differences between the winners and the losers and how they’ve been able to adapt to becoming successful during the pandemic. We talk about anti-fraud, we talk about buy-now-pay-later and he ends with a really interesting perspective on what we can expect to see in the future of payments. It was a fascinating interview, I hope you enjoy the show.
Welcome to the podcast, Brian!
Brian Dammeir: Thanks for having me, Peter.
Peter: My pleasure. So, I’d like to get this thing started by giving the listeners a little bit of background about yourself so why don’t you just give us some of the highlights of your career today, particularly before Adyen.
Brian: Yeah, absolutely. I calmly say that no one gets a degree in fintech servicing the (cross talking) industry.
Peter: Not yet (laughs).
Brian: Yeah, absolutely. I come from a product background, specifically in fraud prevention, that’s how I got into the general fintech and payments realm. So, prior to my six-year tenure at Adyen, I was at Google and Airbnb focusing on fraud prevention mostly on the product side and then, actually, when I came to Adyen I came onboard as our first product manager when we were just a couple of hundred people back in the day. Spent the last four or five years focusing on our product organization, diversifying our product portfolio, how we productize things going out into market and then early this year, I transitioned to leading the North American operations.
Peter: Right, right. So, why don’t you tell the listeners a little bit more about what Adyen does because while it’s very well known in Europe and it’s not quite that way yet here in the US so, just give us a little bit of background about the company itself.
Brian: Yeah, it’s a great question. We’ve been around for over a decade and we’re a company that was founded by payments people. They had payments companies before and they learned a lot during the 90’s going into the dot com boom and into the 2000’s about some of the common pitfalls that payments technology platforms were making. So, you know, from day one, we went into the industry with a really novel approach which is to have one single platform across all channels in as many geographies as possible.
So, in short, we’re a payments technology company that empowers other companies to reach their consumers across a really diverse set of payment methods. We offer hundreds of them as well as geographies, as well as channels all in one platform and this is a really important distinction because most payments companies have multiple platforms. So, if you want to do in-store payments you’re working with one platform, online payments you’re working with another so with one integration, one set of contracts and one relationship, we can unlock many, many countries for the merchants that we service.
Peter: Okay, okay. And so, what is the geographic footprint then right now?
Brian: Yeah. So, honestly, we operate all over the world from Europe to APAC, Australia, South America so, honestly, the countries in which we do acquiring is over 50 and we do sort of core acquiring connected directly to Visa and MasterCard in over ten regions. So, generally speaking, you know, wherever the merchant wants to go to process payments, we’re, generally, able to help to help them out there.
Peter: Right, okay. Maybe explain exactly how you guys make money, is this….you make money on the transactions like a processor or is there a SAS component, what is the model?
Brian: Yeah. We operate under a per transaction fee and we operate under a really transparent model where the fees….they’re associated with the payment method or the network in question, whether that’s Visa, MasterCard or otherwise, those fees are transparent and generally pass through and then there is a known component to Adyen’s cost of operating with our platform per transaction.
Peter: Right, right, okay. So then, I said in Europe you’re a really big player, your name has been around for many years as really one of the leaders in the space, how are you approaching the US market where it’s competitive, obviously there are other big names here, what is your approach?
Brian: Yeah. We’re, generally, operating in North America in two ways. One is to be the global enabler for American companies, right, so whether that’s a Microsoft or an Uber or Spotify, you know, they’re based in North America and obviously we help them here, but they need to operate payments in dozens and dozens of countries and we’re, generally, one of the players of choice to do that. But, we also have an extremely strong focus on our North American proposition itself or domestic proposition. We work with really, really localized brands like e-Bay, Subway and Nike to bring payments into this market.
Now, commonly, North America and the US, in particular, has seen a sort of a static market mode of payments perspective, it’s always been credit cards, will always be credit cards, but one thing that we can’t discount is A) the proliferation of new payment methods in North America, whether you’re talking wallets or installment buy-now-pay-later options or what not, but really importantly, there’s that demand to have a one-platform player who can offer unified commerce.
So, it doesn’t matter if you’re doing in-store/online, we’re able to offer one holistic view of the customer. What we’re finding is there’s a really strong demand for that in North America, especially under COVID where more and more consumers are floating between channels where they used to be an in-store person and now they’re an online person and of course, you have a grain between those channels. We’re finding that we’re getting significant tailwinds with that segment of merchants looking for a solution like that here.
Peter: So then, how does it work exactly, like if you’re…so these companies, they’ve had online presence for a long time, most companies have had an online presence, many of them have a physical presence and you said there’s often two different systems so what’s the difference between….when you’re going to a company that’s got two different systems…tell us, what you were saying is there’s a difference even from the consumer experience.
Brian: Absolutely. So, let’s take for a second the example of a quick service restaurant and let’s say that they traditionally just had a counter. You’d go up to the counter and you would pay cash or card, what not, you know quick service restaurants have changed tremendously in the last five years. Not only do they have kiosks, but they also have in-app Order Ahead and, of course, there’s costs in marketing money going into all those channels.
Now, let’s say you had three different processes for those different channels; someone for the counter, someone for the kiosk and someone for the in app experience, that merchant is unable to actually see that consumers….they float between those channels because there’ll be different tokenization technologies and they can’t even measure the cannibalization.
But, importantly to your question, Peter, they then can’t track them as the same person and then reward them with loyalty so what we’re finding as the advantage of our platform is, you know, you can dip your card in a terminal and then put it in the app later and merchants are able to recognize that and they’re actually able to do things like card-linked loyalty to the consumer and reward them for that loyalty between channels or to variably as passively understand that data, therefore, understand where their consumers are going between channels.
This has been supremely important during COVID as merchants have been trying to understand, you know, where have my consumers been going, did they drop off or did they just simply move to digital channels.
Peter: I totally get that, that sounds like a pretty compelling proposition. It might not have been a big deal back a year or two ago, but I can see how that would be really a….you’ve got to be able to know when your customers are floating between channels. That’s just, I would say, table stakes, I mean, these days.
Peter: Yeah, yeah, okay. So then, I know that you guys are a public company and you came out with your results early this month, a couple of weeks ago, whatever, so why don’t you just, before you go any further at least, give us some highlights of what’s been happening at Adyen as a global company.
Brian: Yeah. We announced our results and despite COVID-19 and its impact on retailers and the travel sector, we had an extremely strong H1. So, we processed over $150 Billion across our platform at a 23% year-over-year growth rate, we saw net revenues across our whole platform grow 27% with North America, in particular, being at a 58% growth rate in that revenues. So, well it is a challenging time, what we’re finding is that there are tailwinds towards these digital channels so when we saw, for example, retail shutdown like a lot of stores were closed prior to a few weeks or a few months, depending on the geography, we saw digital channels significantly uptick.
But, what we’re actually finding, as retail is reopening, some of that e-commerce volume sticking around and what that’s telling us is that consumers that might have been in the past hesitant to interact with the digital channel seem to be very, very comfortable with it. And because we tend to work with our merchants on digital enablement, this is having a really good impact not only on our merchants but on our platform as well even during this challenging time.
Peter: Right, right. So, are you more focused then on the corporate customer that’s looking to be……you said you were focused just here in North America, but is there….I mean, looking at your product suite, is this something that….are you targeting smaller companies or is this really for the larger corporate multi-channel type company?
Brian: Yeah, our focus tends to be enterprise. That being said, we’re also focusing on our mid-market segment, that’s been a focus of our company for the last year or two primarily in Europe. That being said, we have efforts globally around that, but then what I wouldn’t discount is our focus on platforms and marketplaces.
We have a proposition called Adyen for Platforms which allows platforms to enable payments from many smaller sellers on their platform. So, our general strategy when it comes to smaller merchants is to do that via our platform partners. They tend to have that relationship with the end merchant and we empower them with our technology in the back end. This is similar to, for example, for eBay and GoFundMe, for example.
Peter: Right, right, got it, okay, okay, So then, you mentioned that you had a pretty strong first half, like what are you seeing as far as…….you know, you’ve got a great insight into a large amount of commerce and there’s been some really big winners and there’s been some losers as well. I’d love to sort of get your insight into what kind is determining who is successful, who isn’t successful because there are examples of companies that are surprisingly successful in this environment so I’d love to get your insight on that.
Brian: Yeah. When we boil it down, what we’ve noticed is that merchants tend to fit into one or two camps. They were either digitally oriented going into COVID or they weren’t and that’s not to say that they were entirely digital. There are plenty of merchants that started with an in-store experience, but then they started to grow out, reached digital channels. The fact of the matter is that merchants that had reached digital channels recouped 40% of their losses compared to single channel merchants or merchants that had a really immature digital channel and I’ll just give an anecdote, right.
I was on a road trip some months ago and this was sort of peak COVID times where everybody was socially distancing. I was camping, for the record, and we stopped on the side of the highway and it was one of those highway stops that has sort of six chain restaurants, we’re not going to name names, of course, but three of them were open and three of them were closed. Three of them already had curbside pickup, online, in app Order Ahead and they’ve been doing it for a couple of years, had become a trend in their industry and they were clearly on the forefront of that.
Three of them did not yet have that and, therefore, they were shuttered, the lights were off and I think that is the sort of perfect encapsulation of what happened going into COVID-19, but it’s not all dire because the merchants that weathered the storm and did not have those channels are now exploring how to make that happen very quickly. The ones who did have that are now putting more focus and investment on that because as I noted previously, we’re noticing that that digital volume that spiked when those in-store channels went down are sticking around.
So, there’s a whole new set of consumers and demographics interacting with these channels so what we’d like to say actually here is that we skipped five years in the industry. Everybody was….all the trends line towards digital enablement have just been fast forwarded across all consumer demographics and in the end, that’s likely good for the consumer. Of course it’s been a very challenging year for both consumers, of course, and merchants.
Peter: Right, right, it makes sense. I know that here, you know, I have a Chipotle right by my house and right by my office and they never closed down. They might have closed down for a week or two, I don’t know because I wasn’t going out for a while there, but when I went back…and they have a really strong app and a really good experience in payments, it’s a positive experience.
I see they’re in with a whole bunch of other major chains and they were getting all the business for a while because it was the only one open and again, they’ve already gone down the digital enabling path. I don’t know what their hit was, how much volume that went down, but if you didn’t have the whole app ordering and you could just come and pick it up, that was a major negative. So, I imagine then, you probably had companies coming to you in the last six months who said, we need integration and we need it like in two days, how have you been handling that kind of situation?
And what we found, especially in retail, there is very, very quick demand needed around this Pay by Link solutions because it required little to know development effort on the side of the merchant. We went so far as to also integrate that into our terminals and into the in-store experience because some merchants wanted to offer a completely touch free experience, even if you don’t have contactless cards or wallets so what we did is we presented QR codes on our terminals.
That and with the phone goes to a Pay by Link session, the consumer pays in an e-commerce flow on their phone, but then it loops back to the terminal to the point of sale so, you’re bringing a quasi e-commerce experience into the retail arena. So, we found that there’s been significant uptake in these Pay by Link solutions as a quick way of getting started with these channels and then we anticipate those merchants will then go into more and more native experiences as they invest in that channel.
Peter: Right, right, I didn’t realize that. I don’t know how well you know Alipay and Ant Group, they are filing to go public. We got a little bit of insight into their financials which is pretty impressive and it’s all QR-based. I’ve been to China many times and I can’t get an Alipay account, you need a Chinese bank account, but everything is QR code-based. Is that a technology, do you think it is going to take off here in the US?
Brian: In short, I think so. We’ve embracing QR codes for a long time. We partnered with Alipay and WeChat Pay and we’re actually one of the predominant solution providers who offers that natively on a terminal all over the world.
Brian: Your high-end retail merchants leverage our solutions not only for standard payments e-commerce, but we’ve actually had a generic QR code framework for sometime on our platform via our terminals. Now, the speculation is will more and more payment methods in North America embrace QR codes. You see the beginnings of that, for example, with PayPal. For example, we have buy-now-pay-later payment methods like Afterpay and Affirm. I would anticipate that this will begin more and more of a trend that obviously China and Asia Pacific, in general, kicked off sometime ago with QR code payments.
Peter: Right, right, that’s amazing, you see Ant Group they did like $16 Trillion worth of volume which is staggering globally. I see Alipay signs in airports in this country so there’s a lot of times that you guys helping sort of enable that technology?
Brian: Oftentimes, we are, yes, and the main proposition that we offer is, you know, you have a Chinese consumer who’s coming through your store and you can either have Alipay re-check her or not. Generally, they’ll have a TransUnion pay card in their wallet that they can still pay via sort of a traditional method, but they very much prefer this. And studies have shown that the consumer is more likely to buy if you give those options and there’s a lot of cold marketing opportunities with both Alipay and WeChat that members can take advantage of as well.
Peter: Right, right. So, you mentioned buy-now-pay-later a couple of times now. I want to kind of touch on that because it seems to me that, you know, I’ve been following Affirm and following up to pay……I’m originally from Australia and not to pay is…it’s hard to stake how big it is down there, hard to overstate because they are everywhere and it’s now a verb in Australia to ask to pay something. Now, you said you’re sort of agnostic to the payment method, buy-now-pay-later is a little different than just a……like where do you stand and how do you feel about the buy-now-pay-later movement, it seems to be getting more and more traction.
Brian: Yeah. Well, I would note what you just said which is we are agnostic to payment methods, we offer hundreds of them and the reason we do is that payments is a highly cultural thing; different cultures pay in different ways. You go to Germany and cash is king, you go to Australia and to your point, Afterpay has been there so long, it’s a verb. Now, generally speaking, the American consumer has had really good access to credit via credit cards.
That being said, there’s an untapped consumer who doesn’t have access to credit, who needs facilitation of credit in different ways and I think installments in North America is really tapping into that consumer base and you see multiple players from Affirm to Afterpay to PayBright to others really taking advantage of that. From our standpoint, our platform can take on an unlimited number of payment methods so as soon as there is the consumer demand and the merchant demand, we integrate that into our platform, we offer it with one integration to our merchants.
So, we already offer several buy-now-pay-later payment method options across geographies including Afterpay in Australia as well as Europe, Onay (?) in Europe, PayBright, Klarna, so on and so forth, and we’re invested in others into the near future
Peter: Okay. So then, so the merchant, if they are a, as you say…… you know, you could use Klarna as an example, they were the ones who started this whole movement many, many years ago and they’re really strong in Europe so if you’ve got a company that wants to offer buy-now- pay-later solution, they are an Adyen customer, they could just turn on and you can link them up with Klarna and then suddenly it’s available to them, is that…..you know, I’m making it simple, but is that almost as simple as it is?
Brian: It is and that’s why merchants work with us because we do that across hundreds of payment methods across many different geographies and we offer that one point of integration and contracting to do that. From an integration standpoint then, you just need to make sure the front-enders enabling that payment method on your website and then you’re good to go. It’s that sort of ease of turning new things on as the trends change and that’s sort of subscription to ongoing innovation, we call it, with our merchants, that’s what they’re signing up for by working with Adyen.
Peter: Interesting, very interesting, okay. So, you mentioned that you have a background in fraud or anti-fraud, I guess I should say (laughs), I’d love to sort of get your perspective on how that kind of landscape has changed this year. You know, you hear anecdotally about there’s certainly been increases in fraud attempts, what has been your experience at Adyen and how are your combating different forms of fraud?
Brian: Yeah. The nature of e-commerce is that there’s more to consider around fraud. Now, I’m not so sure if I would quantify the last year as more fraud attempts, but rather I would say digital channels are suddenly more important and the nature of the digital channel is that you need to do more around fraud prevention. You know, we don’t have the same protections we have in store like Chip and Pin and all these different things so, there’s simply more to consider there and merchants that previously might have had, I don’t know, 3% of their overall revenue in their digital channels are now seeing 20/40+% so the fraud that they see in those channels has compounding as well.
Peter: Got it.
Brian: And I think, you know, there’s been a lot of change in the prevention industry over the last years. I think the predominant trends would be around continued focus on machine learning and less of a focus on throwing human beings at the problem which is the way the industry did things 10/15 years ago. Adyen itself, we have a native fraud prevention engine built into our platform, we can take all the data points across our entire platform, track not only good users, but also fraudsters, understand their behaviors, run that through our machine learning models and offer that in our one integration to our merchants.
So, instead of having to go out and find a third party risk system, integrate into it, you can get it with your payment processor with the Adyen solution. And, indeed to your point earlier, we’re finding that there’s more and more attention being given to digital fraud by our merchants and, therefore, there’s more and more of the need for a solution like RevenueProtect which is ours.
Peter: Right, right. So, are you saying then that fraud hasn’t necessarily increased, it just moved online….overall fraud, are you saying it hasn’t really increased this year?
Brian: I don’t know if I would be so bold to say, but I’m sure it’s a factor of both. I think the main thing that’s reckoning in the industry though is, you know, losses, fraud losses, that could depend on a small minor channel over here, your digital channel, we’re okay. Now, if that channel is suddenly a third of your business as a company, you know, you’re always going to have a certain amount of fraud in that channel and suddenly there’s a magnifying glass on that.
That’s probably the biggest trend this year that we’re seeing with our merchants. There’s the macro level of trends, however, of fraud will always be an issue and there’s different types of fraud and techniques going on around the world and there’s just simply fraudsters in many geographies that are going to continue other attacks on consumers and non-merchants and that’s never going to go away.
Peter: Right, right, understood. So then, can you give us a sense….I don’t know how much you share publicly, but can you give us a sense of how big the US operation is. You talk about the whole thing, do you break that out at all?
Brian: Yeah. I mean, we break that out in terms of our net revenue, right. So, 18% of our net revenue is North America and now, our San Francisco office is our second biggest office in the company and we just broke through the 200-employee mark in North America out of our roughly 1,500 employees in Adyen overall. So, like I said before, whether it’s our domestic proposition working with merchants like Nike and Subway or North American merchants that we’re servicing around the world like your Microsofts and Spotifys and Ubers, North America serves central to our vision and central to our expansion strategy.
Peter: Right, right. And, obviously, it sounds like you’ve got a lot of room to grow here given that the US is still the biggest autonomous market in the world.
Peter: China is catching up, but still….anyway, before I let you go, I’d love to sort of some sense of….it feels to me like payments, the way we pay for things is sort of…..2020 we are going to look back as this real inflection point, I mean, are there other kinds of developments that are coming down the track? We touched on QR codes, but I’d love to sort of get…for example, Uber made payments invisible like you don’t even know…. you don’t pay, you just sort of get charged. I mean, what are some of the trends that you’re seeing in the payment space you’re thinking down the road?
Brian: Yeah, it’s a great question. We call what you just talked about the Uberification of payments,
Brian: Uber really set a new expectation for consumers, especially in North America, that payments could just be this thing in the background. We know as payments experts that that’s done via tokenization, various different technologies. I would take that one step further though and express that the biggest trend we’re going to see going forward is a melding of the difference between channels, of what is e-commerce and what is online. Take for example your example of the Uberification of payments, but apply it to a normal in-store experience, right.
For example, you have something like the Amazon Go experience. I think we’re going to have more and more experiences like that where it doesn’t matter what the payment method is, there’s always going to be broad variations of that. Is it a credit card, is it a wallet, is it installments, is it this and there’s going to continue to be a proliferation of that, instead of holding in, but I think the trend that’s going to happen is…there used to be this feeling that there is a stark difference between, okay, I’m online right now and I’m in-store.
If I’m in the parking lot of a restaurant and ordering an app, what is that channel. (Peter laughs) It’s not really e-commerce or it’s not really in-store. If you go one step further and we’re empowering merchants for these sorts of flows eliminate the steps altogether, just identify who they are and collect their funds in the background without those explicit payment experiences. I think there’s more and more trends towards reducing the experience, whether that’s Tap N Pay which takes just doing that to the extreme which is the Amazon Go or the Uber experience which is that it’s totally in the background.
I think that’s going to be the trend that’s going to really be the hallmark of the next decade and if merchants are working with a platform like Adyen, that’s singular in its nature across all channels and one integration, they’re going to be able to adapt that change in a seamless way, but without interruptions to their consumers. It’s sort of our core thesis that we present to our merchant base.
Peter: Right, right. Well, it’s going to be interesting because I feel like we’ve compressed five years into six months and it can’t to continue. I imagine the next five years are going to happen in the next six months, but I can see that there’s a lot of exciting technology out there that really will make payments just fade further into the background as we go forward so, interesting times ahead. Thanks, anyway, thank you very much, Brian, I really appreciate coming on the show today,
Brian: It was my pleasure, thanks, Peter.
Peter: Okay, see you.
You know, I think the point of sales space has really been one of the most interesting, I’d say even the hottest part of fintech, you know, buy-now-pay-later is certainly very hot, but really, what’s enabling these all…companies like Adyen… the consumer wants choices, the merchants that provide them with the biggest choices, the most choices, are going to really have an upper hand.
Integrating with buy-now-pay-later, I can see them integrating with other kinds of lending products and you’re going to have this kind of suite of options. Suddenly, your credit card, which has been ubiquitous in this country for decades, is going to be one of many options at the point of sale. As Brian said, Adyen is agnostic to the payment method and if that happens to be an installment loan over two years, I’m sure that’ll be fine to make that happen too, but whatever it is, I think this decade we’re going to see tremendous innovation when it comes to payments at the point of sale, online, in person and it’s going to be exciting to watch.
Anyway on that note, I will sign off. I very much appreciate you listening and I’ll catch you next time. Bye.
Today’s episode was sponsored by Lendit Fintech USA, the world’s largest fintech event dedicated to lending and digital banking is going virtual. It’s happening online September 29th through October 1st. This year, with everything that’s been going on, there’ll be so much to talk about. It will likely be our most important show. So, join the fintech community online this year where you will meet the people who matter, learn from the experts and get business done. LendIt Fintech, lending and banking connected. Sign up today at lendit.com/usa.[/expand]
Peter Renton is the chairman and co-founder of LendIt Fintech, the world’s first and largest digital media and events company focused on fintech. Peter has been writing about fintech since 2010 and he is the author and creator of the Fintech One-on-One Podcast, the first and longest-running fintech interview series. Peter has been interviewed by the Wall Street Journal, Bloomberg, The New York Times, CNBC, CNN, Fortune, NPR, Fox Business News, the Financial Times, and dozens of other publications.